Financial Managers Need Only Concentrate on Meeting the Needs of Shareholders - No Other Group Matters

MANAGEMENT OF BUSINESS FINANCE-
“Financial Managers need only concentrate on meeting the needs of shareholders - no other group matters” Discuss the above statement using practical examples to support you answer.

A shareholder is someone that legally owns one or more share of stock in a company. The objective of the firm is to maximize shareholder value by increasing the value of the company’s stock. Although other potentials exist, such as survival, maximizing market share, maximizing profits and so on, these are co-insistent with maximizing shareholder value.

The responsibility of these objectives is held by Financial Managers. Financial Manger decisions can be divided into three general areas: investment decisions; financing decisions& dividend decisions. The investment principle determines where businesses invest their resources, the financing principle governs the mix of funding used to fund these investments, and the dividend principle answers the question of how much earnings should be reinvested back into the business and how much returned to the owners of the business. These decisions govern and guide everything that gets done and are interdependent with each other.

In practice corporate finance decision are not made solely by corporate financial management. Inside an integrated approach is taken by various directors. Directors that would be involved include finical directors, who oversee the finance function and will also consult with accountants, tax experts and legal counsel. Another director would be a corporate treasurer who keeps in contact with banks and other finical institutions regarding cash flow. Human resource directors help to dictate on ideal candidates for functional roles within the company. Production directors enable materials to be in stock so the company can sell to bring cash in. Selling and promotion of these products to attract a market is the responsibility of the marketing directors. And yet the primary objective of all these directors is to maximize the value of the company for its shareholders.

Within a company there are set corporate objectives to maximize its value. These objectives are based on the company’s mission or aims. The corporate objectives govern the targets for each department of the business. They provide a mechanism for ensuring that authority can be delegated without loss of co-ordination. Among the most common corporate objectives are: to ensure long term stable growth in real terms; to spread risk and achieve growth through diversification; to concentrate upon the firm’s core skills; to maximize market standing; to add value through continuous technological innovation; to achieve profit maximization in the short term to medium term; etc.

While management within a company should make decisions that meet the company objective of maximising shareholder wealth, this may not actually happen in practice, as the “agent is distracted by his own self interest”. This is a concept proposed by Jensen and Meckling (1976) known as Agency Theory.

Jensen and Meckling (1976) defined the agency relationship as a contract under which one party (the shareholder) engages another party (the agent) to perform some service on their behalf. As part of this arrangement, the principal will delegate some or all of the decision-making authority to the agent. In practice, shareholders from most companies delegate the decision-making authority to the board of directors. In turn, the board of directors delegates power to the chief executive officers. The agency problems arise because of the impossibility of perfectly contracting for every possible action of an agent whose...

You May Also Find These Documents Helpful

...﻿
Long-Term FinancialNeeds
Tad Mendez
FIN 486
May 3, 2015
Cyndie Shadow
Long-Term FinancialNeeds
Determining long term financialneeds can be important because they allow the finance section of an organization layout the future expenses for the next year. Pro forma balance sheets detail the projected funds required for the following year. There are also year-end ratios that must be calculated to determine the health of the organization. This financial report will also include how the numbers were obtained for each of the ratios and whether or not the organization will require external funds. There assumptions for the pro forma sheet will be retrieved from the New Strategic Directions Memo.
EFN Calculation
EFN is known as external financing needed and this is required when the organization does not have enough funds to cover long-term obligations. External financing can be raised by the organization usually by issuing securities. Once the pro forma balance sheet is created it can be determined that external funds are not needed. To obtain the EFN the EFN would equal total assets –total liabilities and equity. After calculating this for Huffman Trucking, it is determined that there will not be a need to raise external funds because they have the required funding in their projections.
Ratio calculations
There are several ratios that are used to help...

...MeetingNeeds for Self-Actualization
Everyone has certain needs that must be met in order to live a happy and fulfilling life. These needs are divided into three specific types which are physical, psychological, and social needs. Abraham Maslow, an expert in human behavior, along with Carl Rogers used these three general types to develop a larger hierarchy of human needs for self-actualization. Even though there is discontentment or unending needs of a person, one's needs must be satisfied in order for him or her to be happy. People whose needs were met are particularly in good mental health but if a need fails to be met then pathological effects may ensue.
Self-actualization is a state that a person reaches in which he or she is experiencing life in a way that allows for optimal growth towards a better state of being. The general concept used in the present study is most akin to the two most popular concepts of self actualization presented by the humanistic psychologists Abraham Maslow (1968) and Carl Rogers (1961, 1980). Maslow viewed the self actualized person in two ways. This person will have realized latent potentials, talents and abilities as well as achieved a state of self-fulfillment. "Such people seem to be fulfilling themselves and to be doing the best that they are capable of doing. They are people who have developed...

...CMI Level 3 Diploma in First Line Management
Jackie Bowen
Tutor Name: Liz Pawlowski
Title: Meeting Stakeholder Needs
Unit: 3003
Contents Page Page Number
* Title Page 1
* Content Page 2
* Aim of the report 3
* Identifying Stone Computers key stakeholders 4
* Understand the process required to continually 8
Improve meeting stakeholder’s needs
* Be able to prepare a case to support a change in meeting 11
Stakeholder needs
* Bibliography 14
Aim of the report
In this report I will be focusing on how to identify, meet and support all stakeholder requirements within my Job role, I will base this report on my role as progress controller at stone computers focusing on the following outcomes:
1. Be able to identify the stakeholders and formulate a plan to meet their needs
2. Understand the process required to continually improve meeting stakeholder needs
3. Be able to prepare a case to support a change in meeting stakeholder needs
1 Identifying Stone Computers key Stakeholders.
1.1 Identify stakeholders in relation to the team’s objectives.
A stake holder is a party or person that has an interest, direct or indirect stake in an enterprise or project, Eden and Ackermann (1998) described stake holders as “People or...

...Meeting the Needs of the Youth
One of the most challenging aspects of my ministry has always been the youth. Youth in my books
would be defined as Grade 8 – Grade 12. What makes this a challenging ministry, is the ever
changing make-up of the youth. It seems that every 6 months or so you have an entirely “new”
youth group. It is not “new” in the normal sense as most of them have been in the youth ministry
for a while, it is that they have all changed and it seems like a “new” group. They speak of the
generational theory, stating that each 20 years or so we have a different generation. I however see a
new generation every 2 – 3 years.
The culture we live in is changing at a pace never before experienced. Simply looking at the
advancement of technology over the last decade demonstrates for us the enormity of our current
growth spurt. Although I fall in the same generation theory category as many of my youth, they are
vastly different to me. A change has definitely taken place. I am not sure when it was that I moved
out of the “cool” to “boring” category but it seems that it has happened. As all this change takes
place one can only expect that the needs will also shift. What I wanted as a youth is most definitely
not what the youth wants today. And it is herein that the difficulty lies, assessing the needs of the
day.
Meeting this Need...

...articulate, capable but every child- respecting them for who they are, respecting their language, their culture, their history, their families, their abilities, their needs, their names, their ways and their very essence
(Nutbrown, 1996, p.54).
In relation to the quote discuss the following:
1- Illustrate your essay with one specific group for example children with specific medical difficulties, behaviour problems, etc. Consider the personal, social and emotional factors and their impact on self esteem.
2- What constitute appropriate policy and good practice to ensure all children experience a positive learning environment? Consider the community, school and the individual.
Within education, our society can be seen to ensure that all children, including those who have medical difficulties or behavioural problems feel a sense of belonging within education and are not ignored, although this could be seen as untrue by others. As quoted above a successful school practice would support all young children not excluding any for its aim of providing a desirable development and successful practice for the children “This is an... anti-discriminatory practice which is a fundamental requirement in the delivery of services to all children (Thompson, 2001), this can be seen to be the main aim of a practice as it is where all needs are met without any child in a mainstream school can undergo inclusion. A major contribution...

...Need for Accurate Financial Statements
Presenting a strong, healthy financial picture of an entity or company is crucial in the world of business. In order to present this picture companies use an information system called accounting, which measures the business activity. “The key product of accounting is a set of reports called financial statements.”(Horngren, Harrison, Oliver, p2) These statements report on the entity in terms of money, or in monetary terms in both internal and external controls with all data on the financial statement translating into dollars and cents. The accounting world is divided into two fields; financial and managerial, with each accounting field gathering information to use within the different entities. Financial accounting gathers and shares data for outsiders, such as investors, creditors, and government tax authorities. And managerial accounting gathers and shares data for insiders, such as management, treasurers and other various internal departments, but both fields of accounting need this data to make the best informed decisions for the business. Therefore, it is extremely crucial to keep accurate financial statements since “accounting is the measurement and reporting of financial information to various users regarding the economic activities of the firm” (Russo, 2009), which...

...it can be modified accordingly to the needs of the organization and able to fit in to the organization accordingly to what industries. The purpose of HRIS is not only to keep the information for the personnel but also as a tool to manage the employees within the organization in such efficient ways. As a client of HRIS product, the organization should know what their needs before they begin to use the product from the HRIS vendors to fits their needs. On the other hand, a vendor that supplying the product to HRIS clients should build the product that may fulfill their clients’ needs as could and possibly to fulfill more than 75% of the client’s satisfaction in order to achieve the standard of good application or HRIS product.
Based on the information of the case of Benefast Partner’s, it shows that that company strategy is not efficient enough to handle the continuous need for change. The evaluation on Benefast Strategy could be listed as follow:
i. Poor Gap Analysis
Gap analysis is the culmination of a need analysis, where it is a process of documenting and comparing the current state of the HRIS with the desired future state based on needs that are not being met with the current system or on the other words, gap analysis brings the two previous activities together and provides a communication tool by which to see where the current...

...Huffman Trucking Accounting Financial Report
As the head of the accounting department it is my role to ensure that my team and I provide you with the information that is needed in order to help propel our company into the future. Being the CEO it is your role to get elements of information from all different departments concerning the different ideas, processes and financial workings in order to help set Huffman Trucking on a prosperous path. My job as the head of accounting is to give you all the financial information gathered by my department to give you a better picture as to our long term financialneeds. I will touch upon various points and specific keywords that I will go in more depth about and explain below. I hope this following information suits your needs and that my team and I have done a thorough and detailed job that will allow you to make better-informed decisions.
Let us begin with explaining what EFN is. EFN is external funds needed and is calculated as the difference between the projected total assets and the projected total liabilities and equity.
To calculate the EFN, we start with the income statement to get the amount of net income. To make the income statement, were supplied with a revenue growth of 8% for the next three years. Also, there is extra revenue from new initiatives from consulting and warehousing. All this gives us total revenues. To estimate...